Ed. Note: On September 22, 2020, the Fourth Circuit denied Gannett’s petition for rehearing en banc. On October 8, 2020, the Fifth Circuit denied Schweitzer’s petition for rehearing en banc. We expect the defendants (in Gannett) and the plaintiffs (in Schweitzer) will petition the Supreme Court for certiorari within the coming weeks, and will update this post as new developments arise in the case.
The Fourth Circuit’s recent split decision in Quatrone v. Gannett Co., Inc., No. 19-1212 (4th Cir. Aug. 11, 2020) is sure to raise the blood pressure of sponsors and administrators of retirement plans with single stock funds. Together with a recent Fifth Circuit decision in Schweitzer v. Inv. Comm. of Phillips 66 Sav. Plan, No. 18-cv-20379, 2020 WL 2611542 (5th Cir. May 22, 2020), the Gannett case highlights the dilemma of retirement plan sponsors and fiduciaries, who, as a result of a corporate transaction, inherit a plan investment fund consisting of a single class of stock that does not constitute an employer security for purposes of ERISA (i.e., a “single stock fund”). Plan fiduciaries in these circumstances have been targeted in class actions brought by an aggressive plaintiffs’ bar both for liquidating a single stock fund too soon and for not liquidating a single stock fund soon enough. While courts are still evaluating how to handle these single stock fund cases, a plan fiduciary’s potential exposure for continuing to maintain such a fund seems to turn, at least in part, on the manner in which ERISA’s duties of prudence and diversification apply to the single stock fund as a plan investment option.